Wednesday, at Google’s I/O Event, the company demonstrated their Android prototype phone, a device which has been greatly improved since its last public outing at this year’s CES and Mobile World conferences. Today, Android looks classy enough that you half-expected them to pull a Steve Jobs and announce that you could run out and buy it right now. During the demo, the company showed off some of the applications that will run on Android – like a Google Maps Street View app that drew cheers from the crowd. From the buzz surrounding the Google Phone at this event, it’s clear that Android has a shot at knocking that other touchscreen phone off its pedestal.

Earlier, we asked « how will Android compare to the iPhone? » and we noted what some people were saying about the similarities and differences between the two devices. Now, let’s take a more in-depth look:

Android: Like iPhone, But Open

The session at « Introduction to Android » on Wednesday was full, with everyone wanting to get a look at the latest version of Android. They were not disappointed. The comparisons to the iPhone were obvious: a home screen with colorful icons, a GUI you can interact with via finger taps and swiping gestures, and a built-in maps program.

However, unlike the iPhone, whose popularity led to numerous unauthorized third-party apps prior to the launch of the official SDK, Google is actually encouraging developers to create applications for Android and rewarding them for doing so with cold, hard cash thanks to the Android Developer Challenge. (See our previous coverage here). This has led to numerous third-party applications ready to flood the market when the phone goes to launch, regardless as to which developers win the big prizes (Pictured: Teradesk App). According to PCWorld, Google Developer Advocate Jason Chen told the Android breakout session that developers won’t need to get Android applications certified by anyone nor will there be any hidden APIs accessible only to handset makers or mobile operators. Even the phone’s homescreen and widgets will be customizable – that’s a much different take than the locked-down iPhone – and one that caters to users who like to make their phones their own.

Kicking iPhone’s Apps

Then there are the official Google apps: why use plain old Google Maps (although that is available) when you can use Street View? The Wednesday demo of Google Maps Street View on the phone proved this will be one of the most popular applications the phone will carry. With its built-in compass and accelerometer, Steve Horowitz, Android’s engineering director, showed how he could physically turn around and the phone’s screen would pan to the left or right accordingly.

Also shown were Android’s notification service that displayed new emails, missed calls, and calendar appointments and its unique ability to unlock the phone using any pattern you wish – even via a line of « connect-the-dots » on the screen which you drag your finger across.

Combine these with the current 50 Android Developer Challenge winners (see below), and you’ve got a worthy challenger to the iPhone throne.

What’s Missing

The only glaring omission from Android so far is multi-touch – the iPhone feature that allows for actions like the two-finger pinching movement used to shrink photos. However, Android project leader Andy Rubin said that Android could accommodate that technology if handset makers use multitouch-capable screens. But Android doesn’t even require a touchscreen to work – the platform can be extended to non-touchscreen devices which would allows users to navigate by simply using a phone’s buttons or a trackball.

Also Not To Be Missed

It’s worth noting that the mobile battle isn’t going to just occur between Android and iPhone. Microsoft’s new mobile OS, Windows Mobile 7, for example, may also be a worthy competitor in this arena. When WiMo 7 arrives sometime in 2009, it will allow for touch gestures, motion gestures (moving the phone to perform an action), and includes a revamped UI, a new version of IE that does tabbed browsing, and applications like Windows Live Maps.

Of course, then there are many people who are still quite content, if not downright addicted to, their Blackberry phones. Like Windows Mobile, which works with Microsoft’s Exchange Server, the Blackberry also has a strong userbase in the business world thanks to RIM’s enterprise-friendly server products that many I.T. administrators use.

Whether there will be one overall winner in the mobile OS space is yet to be seen, but it’s likely that the market will stay as segmented as it is today.

There’s still no exact deadline for Android’s launch – only that it will be sometime in the second half of 2008.

The video above comes from the Android Community where there are a number of photos and videos posted from the conference.